Last Updated: 10/12/2025
Introduction
Setting up sales tax correctly is one of the most important compliance responsibilities for ecommerce businesses operating in the United States. Unlike many countries that manage tax at the national level, the United States follows a complex, decentralized system in which individual states—and sometimes counties, cities, and special districts—govern how sales tax is collected and remitted. This creates a challenge for online store owners, especially those selling across multiple states.
This comprehensive guide explains how to set up US ecommerce sales tax, breaking down the requirements, tax nexus rules, state registration procedures, tax calculations, and best practices for online stores on platforms such as Shopify, WooCommerce, BigCommerce, Wix, and others.
The purpose of this article is to simplify the tax landscape and give ecommerce sellers a clear, structured approach to compliance.
Understanding US Sales Tax Basics
Sales tax in the United States is governed by the states. There is no federal sales tax, so ecommerce sellers must comply with the rules of each state in which they are required to collect tax.
Key Characteristics of US Sales Tax
- State-controlled taxation; rates and rules vary.
- Taxes may also apply at county, city, or district levels.
- Ecommerce sellers may be required to collect tax in multiple states.
- Different products (clothing, groceries, digital goods, etc.) may have different taxability.
- Nexus laws determine when a seller is obligated to collect tax.
Understanding these fundamentals is essential before configuring tax settings in any ecommerce platform.
What Is Sales Tax Nexus?
“Nexus” means a connection or presence significant enough for a seller to be required to collect sales tax in a state.
There are two primary types of sales tax nexus:
1. Physical Nexus
A business has a physical nexus when it has a tangible presence in a state.
Examples include:
- An office or headquarters
- A warehouse
- A retail store
- A home office
- Inventory stored in a fulfillment center (including Amazon FBA warehouses)
- Employees or contractors in a state
If an ecommerce seller has physical presence in a state, they must register for a sales tax permit in that state.
2. Economic Nexus
Introduced after the landmark South Dakota v. Wayfair (2018) Supreme Court decision, economic nexus requires a business to collect sales tax based on sales volume or transaction count in a state—even without physical presence.
Most states use thresholds such as:
- $100,000 in sales, or
- 200 transactions per calendar year,
…but exact thresholds vary.
States with Economic Nexus
As of 2025, 45+ states enforce economic nexus laws. Only:
- Delaware
- Montana
- New Hampshire
- Oregon
have NO sales tax.
If an ecommerce store surpasses any state’s threshold, it must register for a sales tax permit and begin collecting taxes from customers in that state.
How to Determine Where an Ecommerce Business Must Collect Sales Tax
To know how to set up US ecommerce sales tax correctly, sellers must determine where they have tax obligations. Follow this structured checklist:
✔ Step 1: Identify physical presence states
List states where the business has physical operations or inventory.
✔ Step 2: Track revenue by state
Monitor total sales to each state, especially those close to economic thresholds.
✔ Step 3: Track transaction counts
Some states enforce thresholds based on the number of orders placed, regardless of revenue.
✔ Step 4: Verify product taxability
Different states tax products such as clothing, supplements, food, and digital goods differently.
✔ Step 5: Register for sales tax permits
Never collect tax without state approval.
✔ Step 6: Configure tax settings in ecommerce platforms
All major platforms allow US sales tax automation.
Registering for a Sales Tax Permit
Once a nexus is established, sellers must register with the state’s Department of Revenue to obtain a permit.
Registration Steps
- Visit the state’s official Department of Revenue website.
- Complete an online business tax registration form.
- Provide information such as:
- Business name and EIN
- Physical address
- NAICS code
- Nexus justification
- Wait for approval (typically 1–10 business days).
- Begin collecting taxes immediately after approval.
Important Rule:
Never collect sales tax until a permit is granted.
Doing so is illegal in most states.
Collecting Sales Tax in Your Ecommerce Platform
Every ecommerce platform provides tools to automate or configure sales tax.
Below is an overview of how major platforms handle US sales tax setup.
Shopify US Sales Tax Setup
Shopify provides the most automated system for US sellers.
How Shopify Handles Tax
- Automatically detects physical and economic nexus when users enter business information.
- Provides accurate, state-level tax calculations.
- Update rate changes automatically.
- Supports destination-based tax collection.
Steps to Set Up Shopify US Sales Tax
- Go to Settings → Taxes and Duties.
- Select United States.
- Enter your business location(s).
- Add nexus states where you have obligations.
- Shopify automatically calculates the correct tax for each location.
Product-Specific Tax Overrides
Shopify allows tax overrides for special categories, such as:
- Clothing
- Food
- Supplements
- Digital goods
WooCommerce US Sales Tax Setup
WooCommerce requires more manual setup unless using tax plugins.
Options to Configure Tax in WooCommerce
1. WooCommerce Tax
- Free integration with Jetpack.
- Provides automated rate calculations.
2. Avalara AvaTax
- Enterprise-level automation.
- Real-time rate calculation.
3. TaxJar
- Extremely popular for ecommerce automation.
- Helps with Nexus tracking and auto-filing.
Steps in WooCommerce
- Navigate to WooCommerce → Settings → Tax.
- Enable “Automated Taxes” (if Jetpack is connected).
- Add nexus states.
- Configure product tax classes.
WooCommerce requires additional care because hosting environments may impact integrations.
BigCommerce US Sales Tax Setup
BigCommerce integrates directly with Avalara AvaTax.
Advantages
- Built-in tax management
- Real-time tax calculation
- Product-level tax rules
- Supports multi-jurisdiction rules automatically
Setup is straightforward:
- Go to Store Setup → Tax.
- Enable AvaTax.
- Enter business nexus details.
- Save settings.
Wix, Squarespace & Other Platforms
These builders provide simplified tax tools suitable for small businesses.
Wix
- Offers automatic US tax calculation via Avalara integration.
- Simple setup for small sellers.
Squarespace
- Allows flat-rate or location-based tax rules.
- Requires manual overrides for complex tax categories.
Destination-Based vs Origin-Based Sales Tax
US sales tax systems follow one of two models:
1. Destination-Based Sales Tax (Most States)
Tax is calculated based on the customer’s location.
Ecommerce generally follows destination-based rules.
Example:
A seller in Texas ships to California → Collect California sales tax.
2. Origin-Based Sales Tax (Few States)
Tax is calculated based on the seller’s location.
Example states:
- Texas
- Pennsylvania
- Virginia
- Arizona
- Utah
Even in these states, remote sellers often follow destination-based rules depending on economic nexus laws.
Configuring Product Taxability
States categorize products differently, making taxability rules complex.
Common Categories
| Product Type | Tax Treatment |
|---|---|
| Physical goods | Taxable in most states |
| Clothing | Tax-free or reduced rate in some states |
| Groceries | Often exempt or reduced |
| Supplements | Varies significantly |
| Software | Often taxed as digital goods |
| Digital downloads | Some states tax, others exempt |
Ecommerce sellers must label products with the correct tax classes within their platforms.
Filing and Remitting Sales Tax
Once taxes are collected, sellers must remit them to the respective states.
Filing Frequency
States assign filing frequency based on sales volume:
- Monthly
- Quarterly
- Semiannual
- Annual
Filing deadlines vary by state.
How to File Sales Tax
- Log in to the state’s Department of Revenue portal.
- Report total sales.
- Report taxable sales.
- Remit the tax owed.
- Submit the return.
Many states charge penalties for:
- Late filing
- Late payment
- Collecting tax without a permit
- Filing zero returns late
Sales Tax Automation Tools
While ecommerce platforms handle tax calculation, sellers often need tools for:
- Nexus tracking
- Auto-filing
- Multi-state compliance
Top Automation Tools
These tools integrate with Shopify, WooCommerce, BigCommerce, and others.
Common Mistakes in US Ecommerce Sales Tax Setup
❌ Collecting tax before permit approval
❌ Not tracking economic nexus thresholds
❌ Applying incorrect tax rates
❌ Misclassifying products
❌ Forgetting to charge tax on shipping (varies by state)
❌ Filing late returns
❌ Assuming digital products are always exempt
Avoiding these errors reduces penalties and protects business compliance.
Shipping Tax Rules
Shipping tax rules vary widely.
Examples:
- California: Shipping not taxable if separately stated.
- Texas: Shipping taxable when shipping physical goods.
- New York: Shipping taxable goods is subject to tax.
Ecommerce sellers must configure shipping tax rules for each state.
Marketplace Facilitator Laws
Large marketplaces (Amazon, Etsy, Walmart, eBay) are often required to collect and remit tax on behalf of sellers.
For sellers who also operate their own ecommerce sites:
- Marketplace sales still count toward nexus thresholds.
- But the marketplace remits tax on those sales.
Understanding this distinction is critical for accurate compliance.
Tax Exemptions & Resale Certificates
Certain buyers are exempt from sales tax, such as:
- Resellers
- Non-profits
- Government agencies
Ecommerce platforms should support tax-exempt customer profiles.
Maintaining Sales Tax Compliance
To stay compliant long-term, sellers must:
✔ Track Nexus monthly
✔ Update product tax codes
✔ Maintain accurate sales records
✔ Renew annual permits when required
✔ Monitor state legislative updates
✔ Use automation for multi-state operations
Compliance must be ongoing—not a one-time setup.
Checklist: How to Set Up US Ecommerce Sales Tax (Complete Summary)
Step 1: Identify nexus states
✔ Physical nexus
✔ Economic nexus thresholds
Step 2: Register for sales tax permits
✔ Apply to state Departments of Revenue
✔ Wait for approval
✔ Never collect tax beforehand
Step 3: Configure taxes in the ecommerce platform
✔ Add nexus states
✔ Enable destination-based rules
✔ Configure product tax classes
✔ Set shipping tax rules
Step 4: Track your sales tax obligations
✔ Monitor revenue and order volumes by state
✔ Update nexus states as business grows
Step 5: Collect and remit taxes
✔ Use platform automation
✔ File returns on time
Step 6: Maintain compliance
✔ Update tax settings as laws change
✔ Use automation tools for accuracy
Conclusion
Setting up sales tax for ecommerce in the United States requires an understanding of nexus laws, product taxability, and the tax rules of multiple states. Although the system is complex, modern ecommerce platforms provide powerful automation tools that simplify tax calculation and collection. By determining where sales tax nexus exists, obtaining necessary permits, configuring platform settings, and maintaining proper filing practices, businesses can operate fully compliant ecommerce stores.
This guide has provided a comprehensive explanation of how to set up US ecommerce sales tax, offering a structured process that businesses can follow to ensure accuracy, compliance, and long-term ease of management. With growing state-level regulations and increasing online sales, proper tax setup is now more critical than ever for ecommerce success in the United States.